Horizontal Analysis Compares a Financial Statement Line Item in the Current

question 48

True/False

Horizontal analysis compares a financial statement line item in the current year with the same line item in the prior year.

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Definitions:

Debt Ratio

Debt ratio is a financial ratio that measures the extent of a company’s leverage, calculated by dividing total liabilities by total assets.

Profit Margin

A financial ratio that shows the percentage of revenue that exceeds the costs of goods sold, indicating the profitability of a business.

Contra Account

An account used in the general ledger to reduce the value of a related account when the two are netted together.

Normal Balance

The side (debit or credit) of an account that is expected to have a positive balance.